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Wednesday, August 10, 2016

Stocks Slide on Crude Pressure

Charles Schwab: On the Market

Posted: 8/10/2016 4:15 PM ET

Stocks Slide on Crude Pressure

Domestic stocks closed the regular trading session lower amid some
mixed earnings results and as crude prices declined, despite a pullback
for the U.S. dollar, on the heels of a report that showed a surprising
rise in oil inventories. Treasuries managed gains, while domestic data
revealed slightly fewer-than-expected job openings for June and a rise
in weekly mortgage applications. Gold managed a mild move higher.

The Dow Jones Industrial Average (DJIA) declined 37 points (0.2%) to
18,496, the S&P 500 Index lost 6 points (0.3%) to 2,176 and the
Nasdaq Composite fell 21 points (0.4%) to 5,205. In moderate volume, 749
million shares were traded on the NYSE and 1.6 billion shares changed
hands on the Nasdaq. WTI crude oil lost $1.06 to $41.71 per barrel,
wholesale gasoline was $0.05 lower at $1.30 per gallon and the Bloomberg
gold spot price rose $5.72 to $1,346.45 per ounce. Elsewhere, the
Dollar Index—a comparison of the U.S. dollar to six major world
currencies—was 0.6% lower at 95.63.

Dow member Walt Disney Co.
(DIS $98) reported fiscal 3Q earnings-per-share (EPS) of $1.62, one
penny above the FactSet estimate, as revenues rose 9.0% year-over-year
(y/y) to $14.3 billion, compared to the expected $14.2 billion. Revenues
at the company's parks and resorts and studio segments topped
forecasts, while its media and networks division sales came in just shy
of forecasts. DIS announced that it is acquiring a 33% stake in
technology services and video streaming company, BAMTech, for
$1.0 billion, while also reporting that it will launch a new
ESPN-branded multi-sport direct-to-consumer service. Shares finished
higher.

The Labor Department's Job Openings and Labor Turnover Survey
(JOLTS), a measure of unmet demand for labor, showed 5.62 million jobs
were available to be filled in June, up from May's 5.51 million level,
and versus the Bloomberg forecast of 5.68 million. The hiring rate
ricked higher to 3.6% from 3.5%, while the separation rate dipped to
3.4% from May's 3.5% pace.

The MBA Mortgage Application Index gained 7.1% last week, after falling 3.5% in the previous week. The increase came as a 9.6% rise for the Refinance Index was accompanied by a 2.6% gain for the Purchase Index. The average 30-year mortgage rate dipped 2 basis points (bps) to 3.65%.

Tomorrow, the U.S. economic calendar will bring the release of the Import Price Index, forecasted to have declined 0.4% m/m during July, after registering a 0.2% increase in June. We will also receive weekly initial jobless claims, expected to have decreased to a level of 265,000 from the previous report's 269,000.

Europe lower on oil, earnings and BoE hiccup, Asia mixed

European equities finished mostly lower amid the backdrop of global
monetary policy divergence and uncertainty, with oil & gas issues
seeing some pressure as crude oil prices lost ground for a second
session. Moreover, a plethora of earnings data weighed on the markets,
along with some strength in the euro. The British pound gave up early
gains and finished little changed versus the U.S. dollar. The pound saw a
brief bounce on the heels of yesterday's failed bond buying operation
by the Bank of England (BoE), which came up short of hitting its target
for bond purchases. The BoE surprisingly boosted its asset purchases and
cut its benchmark interest rate following its monetary policy meeting
last week aimed at bolstering the economy in the wake of the late-June
vote by the U.K. to leave the European Union (EU), known as a Brexit.
For more on the potential impact of the Brexit vote, read Schwab's
Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Brexit's Impact on Sectors, Part Two at www.schwab.com/marketinsight.
And for commentary on how the recent Zika pandemic may or may not
affect the markets, see the latest article from Schwab's Jeffrey
Kleintop, CFA, Does Zika pose an Olympic-sized threat to stocks?, at www.schwab.com/oninternational.
French industrial and manufacturing production figures showed
unexpected month-over-month declines in June. Bond yields in the region
lost ground.

Stocks in Asia finished mixed ahead of tomorrow's national holiday in
Japan and as traders await a plethora of Chinese economic reports.
Japanese equities declined in light trading ahead of the holiday and as
the yen showed some strength to offset a stronger-than-expected increase
in the nation's key machine orders for June, which is used as a gauge
of capital spending. Mainland Chinese issues were lower, while stocks
trading in Hong Kong were higher ahead of this week's flood of economic
data, including tomorrow night's releases of industrial production and
retail sales reports, which will be followed by lending figures for last
month. Schwab's Jeffrey Kleintop, CFA, discusses China data in his
article, Trust but Verify: Five Independent Indicators of China's Economy. Also, Schwab's Director of International Research, Michelle Gibley, CFA, offers 5 Reasons China Won't Crash the Global Economy in 2016. Read both articles at www.schwab.com/oninternational.
Securities in India fell and South Korean listings finished flat, while
weakness in oil & gas issues on yesterday's dip in crude oil prices
outweighed some strength in the healthcare sector to drag Australian
equities lower.

The international economic docket for tomorrow will be light, offering
inflation expectations from Australia and the CPI from France and Italy,
while Italy will also report trade data.

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